© 2024 Maine Public | Registered 501(c)(3) EIN: 22-3171529
Play Live Radio
Next Up:
0:00
0:00
0:00 0:00
Available On Air Stations
Scroll down to see all available streams.

State Revenues Projected To Take A Hit Of $700 Million Or More

Caitlin Troutman
/
Maine Public
Grafitti outside Portland City Hall recently.

April has always been a key month for state revenues. It’s been the month when people who owe income taxes have to pay or face penalties and interest, so most write that check and pay the taxes they owe. But like so many things this year the coronavirus pandemic has changed that.

Maine Public Radio political reporter Mel Leary explained to All Things Considered host Nora Flaherty.

This interview has been edited for clarity.

Flaherty: What has COVID-19 done to tax collections in Maine?

Rebecca Conley
/
Maine Public

Leary: Well, income taxes basically, in Maine and in most states, piggyback on the federal income tax returns. So when the federal government delayed the deadline for paying those final payments for the 2019 taxes to July 15, Maine had to do the same or that would have created a certain nightmare for folks who would have had to scramble to pay a state tax bill. They weren’t even sure what it was because they hadn’t completed their federal tax bill yet. So the state decided they would go along and make this delay until July 15, for state income taxes to be due.

Well, that sounds entirely reasonable. But I gather this has caused another problem.

We’re talking tax year 2019. When the economy was booming, personal income was up and it looked like there would be a significant revenue surplus. But actual cash the state got in April was well below expectations. People tend not to pay bills until they’re due and the same goes for taxes. So those tens of millions of dollars will come in during July when they didn’t come in during April.

So if the state gets the money a little bit later than it’s expecting, what’s the concern?

Well, because July is the start of a new state budget year. So that cash that was supposed to come in during the current year is being delayed. And the state has changed its accounting procedures from a traditional cash method to what many businesses use — it’s called accruel accounting, which allows the state to book revenue as it occurs, not when the cash is actually paid into the Treasury. Now, some conservatives are critical of that move, because under cash accounting, the state was down some $248 million from expected revenue. But using the accrual method, the state’s now running ahead by about $16 million.

So what is the bottom line? Are we running a surplus in Maine or a deficit?

Well, that’s one of the arguments of course. The budget year that ended June 30, we’re running a surplus using the Mills administration’s bookkeeping method, the accrual method. The real problem is the new budget year, when the impact of massive unemployment, loss of income and closed businesses could conservatively cost over $700 million in revenues in the fiscal year that starts July 1. And that’s why Gov. Janet Mills and other governors are pushing Congress to offset all of that lost revenue.

So what does this mean in terms of actual programs and spending by the state? I understand why it’s an accounting problem, but what will it mean for the people of Maine?

What it means is people of Maine who owe tax bills have a little longer time to pay those tax bills. The whole idea there is to try to help them get through this significant economic downturn. That’s the real impact, because the rest of it is bookkeeping and politics, because the critics of the governor using this this accounting method really should look at what businesses use, and that is businesses use accrual accounting all the time.

This interview is part of our series “Deep Dive: Coronavirus.” For more in the series, visit mainepublic.org/coronavirus.

Originally published May 19, 2020 at 5:02 p.m. ET.

Journalist Mal Leary spearheads Maine Public's news coverage of politics and government and is based at the State House.
Nora is originally from the Boston area but has lived in Chicago, Michigan, New York City and at the northern tip of New York state. Nora began working in public radio at Michigan Radio in Ann Arbor and has been an on-air host, a reporter, a digital editor, a producer, and, when they let her, played records.